Johnson Controls International (JCI) Q1 2026 earnings summary

Executive summary

• Achieved 7% year-over-year sales growth to $5.8 billion, with organic sales up 6% and broad-based strength across all regions and segments.

• Adjusted EBIT margin expanded by 190 basis points to 12.4%, and adjusted EPS rose nearly 40% year-over-year to $0.89, exceeding guidance.

• Orders grew 39% year-over-year, with record backlog up 20% to $18.2 billion, driven by strong demand in data centers and robust contributions from all regions.

• Advanced portfolio with innovations in cooling and connectivity, and completed sale of ADT Mexico Security business, recognizing a $70 million pre-tax gain.

• Significant one-time items included $130 million in insurance recoveries related to AFFF litigation.

Financial highlights

• Gross profit reached $2.07 billion, with gross margin improving to 35.8% year-over-year.

• Operating income before taxes was $708 million, up from $408 million year-over-year.

• Free cash flow was $531 million; adjusted free cash flow was $428 million, with conversion at 77%.

• Net debt at quarter-end was $9.15 billion, with net debt to adjusted EBITDA at 2.2x.

• SG&A expenses decreased 13% to $1.2 billion, primarily due to insurance recoveries and divestiture gains.

Outlook and guidance

• Q2 2026 guidance: organic sales growth ~5%, operating leverage ~45%, adjusted EPS ~$1.11.

• FY26 guidance: mid-single-digit organic sales growth, operating leverage ~50%, adjusted EPS ~$4.70 (raised from ~$4.55), and adjusted free cash flow conversion ~100%.

• Backlog grew 20% year-over-year to $18.2 billion, with orders up 39%, led by strong demand in data center projects.

• Restructuring plan expected to be completed by fiscal 2027, targeting $500 million in annual cost savings.